Wednesday, March 13, 2013
Posted by D. Daniel Sokol
Roger Van den Bergh (University of Rotterdam) argues BEHAVIORAL ANTITRUST: NOT READY FOR THE MAIN STAGE.
ABSTRACT: Antitrust law is firmly grounded in rational choice theory. The behavioral antitrust literature introduces irrationality into the analysis of the reasons and effects of firms' behavior. Behavioral scholars claim that several antitrust issues may be better understood by taking account of heuristics and cognitive biases in the firms' decision making processes. Generally, by arguing that welfare losses may be caused by irrational behavior of firms, the behavioral antitrust literature tends towards more interventionism. This article questions the view that irrationality of firms would be a better assumption for explaining and predicting market behavior and designing competition rules. Moreover, the usefulness of a behavioral approach is restricted by the ambiguous results of the theoretical analysis. Rather than adopting an anti-Chicago profile, behavioral scholars should explore potential synergies with the mainstream Post-Chicago literature. Information economics, the theory of the firm and game theory have created scope for bounded rationality and information problems in the analysis of firms and markets. Behavioral antitrust can enrich but may not replace mainstream antitrust economics. Currently, behavioral antitrust certainly does not require a change of the competition rules or antitrust methodology. Behavioral antitrust is a side act and not (yet) ready for the main stage.